Explain cost benefit analysis, Operation Management

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Explain cost benefit analysis.

Cost Benefit Analysis: This analysis is a mathematical technique for decision-making. This is a quantitative technique used to estimate the economic costs and the social benefits related with a particular course of action. Within this technique, an effort is made to recognize all costs and benefits, not only those which may be expressed in rupees, but also the less simply calculated effects of a specified decision.

Generally, this technique (that is fairly complicated) is advocated for utilize in decisions on public projects, wherein social costs and social benefits, with actual out-of-pocket costs must be taken into account. What counts as a profit or loss to one part of economy - to one or groups or more persons -does not essentially count as a benefit or loss to the economy as an entire.

In this analysis we are concerned with the economy as a complete, with the welfare of a explained society and not any smaller part of this. But cost-benefit analysis may also be appropriate to a single company, for in several cases, this is advisable to place a value on costs and benefits which are not ordinarily expressed in rupees.

Somewhat same to cost-benefit analysis is the cost-effectiveness analysis that is an analysis to find out the least expensive way of reaching an objective or of acquiring the greatest possible value from a specified expenditure.


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